Fall Financials Are Separating Corporates Into Haves and Have-Nots

September 2009 financial reports are creating two distinct corporate credit union camps: those that can absorb more losses from U.S. Central and other investments and those that can't.

The $1.35 billion Volunteer Corporate Credit Union and the $2 billion Corporate America Credit Union are among those reporting their retained earnings will cover a total loss of U.S. Central capital, if necessary.

Corporate America boasts $13.6 million in undivided earnings to guard against its remaining $6 million in U.S. Central member capital shares and a $5 million OTTI CEO Thomas Bonds said he may have to record next month after CACU's third-quarter investment review is complete.

The Irondale, Ala.,-based corporate bucked the trend and grew its assets in September, up $100 million from Aug. 30 and nearly $630 million from Sept. 30, 2008.

VolCorp Chief Financial Officer Jeff Merry was also able to brag about "NPCU flight-to-quality" in his notes that accompanied the Nashville, Tenn.-based corporate's Sept. 30 financial statements. VolCorp's assets have increased nearly $30 million over the past year.

Like other corporates, Merry said he expects additional impairments to further deplete U.S. Central capital once the Lenexa, Kan.-based corporate's third-quarter Clayton investment study is completed. However, VolCorp's $9.18 million in retained earnings can cover its remaining $7 million in U.S. Central MCS.

Other corporates were singing a different tune, depleting paid-in capital and MCS as recommended by the NCUA or announcing expected capital depletions that will be recorded as of Oct. 31.

The $7.5 billion Members United Corporate FCU recorded a 100% depletion of its paid-in capital and a 40.2% depletion of membership shares as of Sept. 30. The accounting move, in accordance with NCUA guidance, eliminated its retained deficit that existed as of Aug. 31, 2009.

That leaves $281.5 million in membership capital shares to guard against expected additional investment losses that will be recorded in future financial statements. However, Members United management said that amount should cover anticipated third-quarter investment losses revealed by Clayton's analysis of its own and U.S. Central's portfolios.

Any additional depletions will be charged against remaining membership capital share balances in November 2009, the report added.

The $1.6 billion First Carolina Corporate Credit Union reported it will deplete 64% of its member paid-in capital accounts after U.S. Central and its own investment losses exceeded retained earnings. However, the deficit won't be applied to capital until October month-end.

First Carolina said it expects to take another hit in November, after it receives U.S. Central's third-quarter Clayton report. Its own Clayton report is projecting a mixed bag, with a majority of bonds showing unrealized loss improvements, but others that are expected to deteriorate in value. Like other corporates, the failure or impending failure of monoline insurers is partly to blame.

The $316 million Treasure State Corporate Credit Union also made its September 2009 numbers public. The Helena, Mont.-based corporate reported $10.85 million of its own MCS to guard against $6.8 million in U.S. Central MCS. Treasure State's investment portfolio does not include any asset-backed or mortgage-backed securities.